Management and Cost Accounting 8th

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Chapter 10 - Activity-based costing

MULTIPLE CHOICE

1. Products might consume overhead in different proportions due to

a. differences in product size.
b. differences in setup times.
c. differences in product complexity.
d. all of the above.
ANS: D PTS: 1 REF: 10.3

2. The activity-based resource usage model improves managerial control and decision making such as
a. the best way to use excess activity capacity in the system.
b. maximization of individual unit performance.
c. increasing the allocation of costs.
d. focusing on managing costs rather than activities.
ANS: A PTS: 1 REF: 10.4

Figure 10-1

Wheat Manufacturing has four categories of overhead. The four categories and the expected overhead
costs for each category for next year are as follows:

Maintenance £120,000
Materials handling 18,000
Setups 16,000
Inspection 60,000

Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour
hours. For next year, 20,000 direct labour hours are budgeted.

The company has been asked to submit a bid for a proposed job. The plant manager feels that
obtaining this job would result in new business in future years. Usually bids are based upon full
manufacturing cost plus 15 per cent.

Estimates for the proposed job are as follows:

Direct materials £2,000

Direct labour (600 hours) £6,000
Number of materials moves 4
Number of inspections 6
Number of setups 8
Number of machine hours 80

In the past, full manufacturing cost has been calculated by allocating overhead using a volume-based
cost driver--direct labour hours. The plant manager has heard of a new way of applying overhead that
uses cost pools and cost drivers.

Expected activity for the four activity-based cost drivers that would be used are as follows:

Machine hours 5,000

 Material moves 600
Setups 200
Quality inspections 1,000

3. Refer to Figure 10-1. If Wheat Manufacturing used direct labour hours as the cost driver and the
company's bid is full cost plus 15 per cent, the company's bid would be
a. £17,480.
b. £16,583.
c. £13,110.
d. £12,765.
ANS: B
SUPPORTING CALCULATIONS:

Direct materials £ 2,000

Direct labour 6,000
Overhead (£214,000/20,000)  600 __6,420
Total cost £14,420

Bid price = £14,420  115% = £16,583

PTS: 1 REF: 10.3

4. Refer to Figure 10-1. If Wheat Manufacturing used activity-based cost drivers to assign overhead and
the company's bid is full cost plus 15 per cent, the company's bid would be
a. £12,696.00
b. £13,965.60
c. £10,120.00
d. £9,936.00
ANS: A
SUPPORTING CALCULATIONS:
Maintenance: £120,000/5,000 = £24
Materials handling: £18,000/600 = £30
Setups: £16,000/200 = £80
Inspections: £60,000/1,000 = £60

Direct materials £ 2,000

Direct labour 6,000
Overhead:
Maintenance (£24  80) £1,920
Materials handling (£30  4) 120
Setups (£80  8) 640
Inspections (£60  6) ___360 __3,040
Total cost £11,040

Bid price = £11,040  115% = £12,696.00

PTS: 1 REF: 10.3

Figure 10-2
 Anderson Company manufactures a variety of toys and games. John Boone, president, is disappointed
in the sales of a new board game. The game sold only 10,000 units in 2011 when 30,000 were
projected. Sales for 2008 look no better. At £100 per game, it is not a hot seller. Direct costs of the
board game are £56 variable cost and £100,000 fixed. John is considering several options. Option One:
Cut the price to £70 and perhaps sell 15,000 units. Option Two: Cut the price to £60, reduce material
costs by £10, and cut advertising by £60,000. Anticipated volume for this option is 10,000 units.
Option Three: Cut the price to £80 and include a £10 mail-in rebate offer. It is anticipated that 15,000
units could be sold and only 30 per cent of the rebate coupons would be redeemed.

5. Refer to Figure 10-2. What is the profit (loss) from Option One?
a. £1,050,000
b. £210,000
c. £950,000
d. £110,000
ANS: D
SUPPORTING CALCULATIONS:

Revenues (£70 ?6? 15,000) £1,050,000

Less: Variable costs £840,000
Fixed costs _100,000 ___940,000
Profit £ 110,000

PTS: 1 REF: 10.3

6. Refer to Figure 10-2. What is the profit (loss) from Option Two?
a. £600,000
b. £100,000
c. £40,000
d. (£100,000)
ANS: B
SUPPORTING CALCULATIONS:

Revenues (£60 ?6? 10,000) £600,000

Less: Variable costs £460,000
Fixed costs __40,000 _500,000
Profit £100,000

PTS: 1 REF: 10.3

7. Refer to Figure 10-2. What is the profit (loss) from Option Three?
a. £215,000
b. £1,200,000
c. £110,000
d. (£60,000)
ANS: A
SUPPORTING CALCULATIONS:

Revenues (£80 ?6? 15,000) £1,200,000

Less: Variable costs £840,000
Rebate costs 45,000
Fixed costs _100,000 ___985,000
 Profit £ 215,000

PTS: 1 REF: 10.3

8. Refer to Figure 10-2. Which option is preferred?

a. Option One
b. Option Two
c. Option Three
d. Options One and Three are equally preferred.
ANS: C
SUPPORTING CALCULATIONS:
Option Three has the highest profit.

PTS: 1 REF: 10.3

9. Which of the following statements is FALSE?

a. The mark up is a percentage applied to base cost.
b. The mark up is an absolute rule.
c. A major advantage of mark up pricing is that standard mark ups are easy to apply.
d. The mark up can be calculated using a variety of bases.
ANS: B PTS: 1 REF: 10.7

Figure 10-3

Farr Company had the following information:

Revenues £400,000
Cost of goods sold:
Direct materials £100,000
Direct labour 50,000
Overhead __50,000 _200,000
Gross profit £200,000
Selling and administrative expenses __75,000
Operating income £125,000

10. Refer to Figure 10-3. What is the mark up based on cost of goods sold?
a. 50.0%
b. 100.0%
c. 37.5%
d. 62.5%
ANS: B
SUPPORTING CALCULATIONS:
(£75,000 + £125,000)/£200,000 = 100%

PTS: 1 REF: 10.7

11. Refer to Figure 10-3. What is the mark up based on prime costs?
a. 300.0%
b. 133.3%
c. 50.0%
d. 166.7%
 ANS: D
SUPPORTING CALCULATIONS:
(£75,000 + £125,000 + £50,000)/£150,000 = 166.7%

PTS: 1 REF: 10.7

Figure 10-4

Jamie Ltd. had the following information:

Revenues £250,000
Cost of goods sold:
Direct materials £50,000
Direct labour 37,500
Overhead _62,500 _150,000
Gross profit £100,000
Selling and administrative expenses __37,500
Operating income £ 62,500

12. Refer to Figure 10-4. What is the mark up based on materials?

a. 400.0%
b. 185.7%
c. 42.9%
d. 71.4%
ANS: A
SUPPORTING CALCULATIONS:
(£62,500 + £37,500 + £62,500 + £37,500)/£50,000 = 400%

PTS: 1 REF: 10.7

13. Refer to Figure 10-4. What would be the price for something that has a cost of £500, assuming that the
mark up is based on cost of goods sold?
a. £833
b. £625
c. £708
d. £2,000
ANS: A
SUPPORTING CALCULATIONS:
£500 + (66.7% ?6? £500) = £833

PTS: 1 REF: 10.3

14. Price skimming occurs in which of the following life-cycle stages?

a. Introduction
b. Growth
c. Maturity
d. Decline
ANS: A PTS: 1 REF: 10.1

15. ____ is the pricing of a new product at a low initial price to build market share quickly.
a. Penetration pricing
b. Predatory pricing
 c. Price skimming
d. Target costing
ANS: A PTS: 1 REF: 10.1

16. ____ is where a higher price is charged at the beginning of a product's life cycle.
a. Penetration pricing
b. Predatory pricing
c. Price skimming
d. Target costing
ANS: C PTS: 1 REF: 10.1

17. Which of the following is a FALSE statement about target costing?

a. Target costing is a method of determining the cost of a product or service based on the
price that customers are willing to pay.
b. The cost is calculated by subtracting the desired profit from the target price.
c. Target costing is an interactive process.
d. Target costing is cost driven.
ANS: D PTS: 1 REF: 10.3

18. Which of the following stages is characterized by rapid increases in sales and production?
a. Introduction
b. Growth
c. Maturity
d. Decline
ANS: B PTS: 1 REF: 10.1

19. Which of the following stages has revenues for the entire industry decreasing?
a. Introduction
b. Growth
c. Maturity
d. Decline
ANS: D PTS: 1 REF: 10.1

Figure 10-5

Ander Company produces precision equipment for major buyers. Of the six customers, one accounts
for 40 per cent of the sales, with the remaining five accounting for the rest of the sales. The five
smaller customers purchase equipment in roughly equal quantities. Orders placed by the smaller
customers are about the same size. Data concerning Ander's customer activity follow:

Large Customer Five Smaller

Customers
Units purchased 400,000 600,000
Orders placed 10 350
Number of sales calls 20 230
Manufacturing cost £1,200,000 £1,800,000

Order-filling costs for Ander Company total £360,000, and sales-force costs are £375,000.
20. Refer to Figure 10-5, what amount of order-filling costs would be allocated to the large customer if
these costs are allocated based on sales volume?
a. £144,000
b. £216,000
c. £150,000
d. £225,000
ANS: A
SUPPORTING CALCULATIONS:
£360,000 ?6? .40 = £144,000

PTS: 1 REF: 10.11

21. Refer to Figure 10-5 above, what amount of order-filling costs would be allocated to the large
customer if these costs are allocated using an activity-based costing approach?
a. £10,000
b. £350,000
c. £28,800
d. £331,200
ANS: A
SUPPORTING CALCULATIONS:
£360,000/(10 + 350) = £1,000 per order

£1,000 ?6? 10 = £10,000

PTS: 1 REF: 10.11

22. Refer to Figure 10-5 above, what amount of order-filling costs would be allocated to the five smaller
customers if these costs are allocated using an activity-based costing approach?
a. £10,000
b. £350,000
c. £28,800
d. £331,200
ANS: B
SUPPORTING CALCULATIONS:
£360,000/(10 + 350) = £1,000 per order

£1,000 ?6? 350 = £350,000

PTS: 1 REF: 10.11

23. Refer to Figure 10-5 above, what amount of sales-force costs would be allocated to the five smaller
customers if these costs are allocated based on sales volume?
a. £144,000
b. £216,000
c. £150,000
d. £225,000
ANS: D
SUPPORTING CALCULATIONS:
£375,000 ?6? .60 = £225,000

PTS: 1 REF: 10.11

24. A target cost is computed as
a. the cost to manufacture plus a desired mark up.
b. the cost to manufacture plus the designated selling expenses.
c. the market willingness to pay less the cost to manufacture.
d. the market willingness to pay less the desired profit.
ANS: D PTS: 1 REF: 10.3

25. Setting prices below cost for the purpose of injuring competitors and eliminating competition is
a. predatory pricing.
b. target pricing.
c. price discrimination.
d. price gouging.
ANS: A PTS: 1 REF: 10.3

26. World-class organizations operating in competitive markets are more likely to take which one of the
following approaches toward pricing?
a. Begin with cost data as given and determine price by adding a reasonable mark-up.
b. Determine price based on the amount management believes customers are willing to pay.
c. Employ a cost-based approach to pricing.
d. Determine the price that keeps the facilities fully utilized.
ANS: B PTS: 1 REF: 10.11

27. When cost-based pricing is employed and mark up is based on manufacturing costs, the mark up must
be sufficiently large enough to:
a. cover selling expenses.
b. cover administrative expenses.
c. provide for the desired profit.
d. accomplish all of the above.
ANS: D PTS: 1 REF: 10.3

28. Which of the following statements describes a legitimate disadvantage of cost-based pricing?
a. Marginal costs and revenues are difficult to measure.
b. Determining the amount a customer is willing to pay may require sufficient estimation.
c. Customers may not be willing to pay the price determined by the procedure.
d. all of the above
ANS: C PTS: 1 REF: 10.8

29. Cost-based pricing has traditionally been important because:

a. cost data are available.
b. cost-based prices are defensible.
c. revenues must exceed costs if the firm is to remain in business.
d. of all of the above.
ANS: D PTS: 1 REF: 10.9

Figure 10-6

Multiple Products Co. has predicted the following costs for this year for 100,000 units:

Selling and
 Manufacturing Administrative
Variable £ 400,000 £100,000
Fixed 600,000 300,000
Total £1,000,000 £400,000

30. Refer to Figure 10-6. What is the mark up on variable costs needed to achieve a target profit of
£100,000?
a. 375 per cent
b. 275 per cent
c. 250 per cent
d. 200 per cent
ANS: D PTS: 1 REF: 10.7

31. Refer to Figure 10-6. What is the manufacturing cost mark up needed to obtain a target profit of
£100,000?
a. 100 per cent
b. 67 per cent
c. 50 per cent
d. 25 per cent
ANS: C PTS: 1 REF: 10.7

32. Refer to Figure 10-6. What is the mark up on variable costs needed to break even?
a. 100 per cent
b. 40 per cent
c. 140 per cent
d. 180 per cent
ANS: D PTS: 1 REF: 10.7

33. Which of the following accurately describes the effect target costing has on the manufacturing design
function?
a. Target costing allows the design engineer's job to end once the product is designed.
b. Target costing forces design engineers to explicitly consider the costs of manufacturing
and other aspects of business that traditionally fall outside the engineering department.
c. Target costing defines clear lines of responsibility among departments allowing for design
engineers to be evaluated purely on meeting the customer's functional requirements.
d. Target costing has no implications for design engineering.
ANS: B PTS: 1 REF: 10.3

34. Which of the following statements concerning target costing is NOT true?
a. Implementing target costing requires detailed information on the cost of alternative
activities.
b. Target costing can be applied to components of products as well as the new products as a
whole.
c. A primary advantage of target costing is that it requires little or no coordination among
processes.
d. Short product life cycles increase the importance of target costing.
ANS: C PTS: 1 REF: 10.3

35. If activity-based costing is used, materials handling would be classified as a

a. unit-level activity.
 b. batch-level activity.
c. product-level activity.
d. facility-level activity.
ANS: B PTS: 1 REF: 10.1

36. If activity-based costing is used, modifications made by engineering to the product design of several
products would be classified as a
a. unit-level activity.
b. batch-level activity.
c. product-level activity.
d. facility-level activity.
ANS: C PTS: 1 REF: 10.1

37. Which of the following quantities is an example of an activity cost driver in activity-based costing?
a. number of direct labour hours
b. number of labour transactions
c. number of machine hours
d. all of the above
ANS: D PTS: 1 REF: 10.3

SHORT ANSWER

1. Provide a short critique of cost-based pricing. What are the four major drawbacks to this pricing
approach?

ANS:
Cost-based pricing was the dominant approach to pricing when products were long-lived and
competition was low. However, in today's business environment, few products or services meet either
of these conditions. Cost-based pricing models generally assume all costs are unavoidable and do not
encourage the efficiency in operations that is needed to compete in today's business environment.

The four drawbacks to such an approach are:

1. Managers face limitations of obtaining accurate cost information. Particularly

challenging are the issues of accurately classifying fixed and variable costs and of
determining accurate cost assignments.
2. Unassigned costs can lead to underpricing, and thus to reduced or negative profits.
3. Customers may not be willing to pay the price determined by the model.
4. This approach can slow the time required to new products to market.

PTS: 1 REF: 10.8

PROBLEM

1. Baker Manufacturing has four categories of overhead. The four categories and the expected overhead
costs for each category for next year are as follows:

Maintenance £140,000
Materials handling 60,000
Setups 50,000
Inspection 100,000

Currently, overhead is applied using a predetermined overhead rate based upon budgeted direct labour
hours. For next year, 50,000 direct labour hours are budgeted.

The company has been asked to submit a bid for a proposed job. The plant manager feels that
obtaining this job would result in new business in future years. Usually bids are based upon full
manufacturing cost plus 30 per cent.

Estimates for the proposed job are as follows:

Direct materials £5,000

Direct labour (750 hours) £7,500
Number of materials moves 8
Number of inspections 5
Number of setups 3
Number of machine hours 300

In the past, full manufacturing cost has been calculated by allocating overhead using a traditional
volume-based cost driver system--direct labour hours. The plant manager has heard of a new way of
applying overhead that uses cost pools and cost drivers.

Expected activity for the four activity-based cost drivers that would be used are as follows:

Machine hours 16,000

Material moves 4,000
Setups 2,000
Quality inspections 8,000

Required:

a. Determine the amount of overhead that would be allocated to the proposed job if direct
labour hours are used as the traditional volume-based cost driver.
Determine the total cost of the proposed job.
Determine the company's bid if the bid is based upon full manufacturing cost plus 30 per
cent.
b. Determine the amount of overhead that would be applied to the proposed job if
activity-based costing is used.
Determine the total cost of the proposed job if activity-based costing is used.
Determine the company's bid if activity-based costing is used and the bid is based upon full
manufacturing cost plus 30 per cent.
c. Which product costing method produces the more competitive bid?

ANS:
a. £5,250 (£140,000 + £60,000 + £50,000 + £100,000)/50,000 = £7 per DLH
£7  750 DLH = £5,250
£17,750 £5,000 + £7,500 + £5,250
£23,075 £17,750  130%
b. £2,882.50
Maintenance: £140,000/16,000 = £8.75 per machine hour
Materials handling: £60,000/4,000 = £15 per move
Setups: £50,000/2,000 = £25 per setup
Inspection: £100,000/8,000 = £12.50 per inspection
 Overhead assigned:
£8.75  300 £2,625.00
£15  8 120.00
£25  3 75.00
£12.50  5 ____62.50
£2,882.50

£15,382.50 £5,000 + £7,500 + £2,882.50

£19,997.25 £15,382.50  130%

c. Activity-based costing produces more accurate cost information and a more competitive bid.

PTS: 1 REF: 10.3

2. Nordholm Construction Company builds houses. Each job requires a bid. Nordholm's bidding policy is
to estimate the costs of materials, direct labour, and subcontractor's costs. These are totaled and a mark
up is applied to cover overhead and profit. In the coming year, Nordholm believes it will be the
successful bidder on ten jobs with the following total revenues and costs:

Revenues £648,000
Materials £200,000
Direct labour 250,000
Subcontractors _150,000 _600,000
Residual £ 48,000

The residual will cover overhead and profits.

Required:

a. What is the mark up percentage on total direct costs?

b. Suppose Nordholm is asked to bid on a job with estimated direct costs of £55,000. What is the
bid? If the customer complains that the profit seems pretty high, how might Nordholm counter
that?

ANS:
a. Mark up percentage = £48,000/£600,000 = 8%

b. Bid = £55,000 ?6? 1.08 = £59,400

Nordholm should remind the customer that the 8 per cent mark up on direct costs is not pure
profit. It includes overhead as well as profit. In construction, an 8 per cent overhead plus profit
rate may be a little low.

PTS: 1 REF: 10.7

3. Many products have a predictable profit or product life cycle. Describe the product life cycle from the
marketing perspective. In addition, graph profit versus the different phases. Finally, discuss the impact
of the product life cycle on products, learning effects, setups, purchasing, and marketing expenses.

ANS:
The product life cycle describes the profit history of the product according to four stages; introduction,
growth, maturity, and decline. The graph would look like the following:
The impact of the product life cycle on cost management would be as follows:

Introduction Growth Maturity Decline

Product: Basic design, Some Proliferation Minimal

changes,
few models improvements, of product reduced number
of
expanding lines, extensive product lines
product line differentiation

Learning High costs, Still strong, Stable No learning,

Effects: much learning, learning production, labour as
but little begins to little to no efficient as
payoff reduce costs learning it can be

Setups: Few, but More, as new Many, Fewer, as

new and models are as product only best
unfamiliar introduced differentiation selling lines
occurs are produced

Purchasing: May be high Lower, reliable May be high, Fewer suppliers

as new suppliers found, depending on and orders
materials and few materials line changes as existing
suppliers changes inventories are
are sought liquidated

Marketing Low selling Increased Supportive Minimal

Expense: and distribution advertising and advertising, advertising,
cost to small distribution increased trade distribution,
number of discounts, high and promotion
target markets distribution costs

PTS: 1 REF: 10.1

4. Bay Company produces boats for 11 major buyers. Of the 11 customers, one accounts for 45 per cent
of the sales, with the remaining ten accounting for the rest of the sales. The ten smaller customers
purchase boats in roughly equal quantities. Orders placed by the smaller customers are about the same
size. Data concerning Bay's customer activity follow:

Large Customer Ten Smaller Customers

Units purchased 4,500 5,500
Orders placed 5 545
Number of sales calls 15 245
Manufacturing cost £800,000 £980,000

Order-filling costs for Bay Company total £401,500, and sales-force costs are £260,000.

Required:

a. Determine the amount of selling costs (order-filling and sales-force costs) allocated to (1) the
large customer and (2) the ten smaller customers if these costs are allocated based on sales
volume.
b. Determine the amount of selling costs (order-filling and sales-force costs) allocated to (1) the
large customer and (2) the ten smaller customers if these costs are assigned using
activity-based costing.
c. Comment on the differences in amounts attributed to the smaller customers in requirements a
and b.

ANS:
a. Order-filling costs:
Large customer: £401,500 ?6? .45 = £180,675

Smaller customers: £401,500 ?6? .55 = £220,825

Sales-force costs:
Large customer: £260,000 ?6? .45 = £117,000

Smaller customers: £260,000 ?6? .55 = £143,000

b. Order-filling costs: £401,500/(5 + 545) = £730 per order

Large customer: £730 ?6? 5 = £3,650

Smaller customers: £730 ?6? 545 = £397,850

Sales-force costs: £260,000/(15 + 245) = £1,000 per sales call

Large customer: £1,000 ?6? 15 = £15,000

Smaller customers: £1,000 ?6? 245 = £245,000

c. The smaller customers are shown to be more expensive when activity-based costing is used.
The smaller customers cost more due to smaller, more frequent orders and the need for more
contact with the sales force. The order-filling costs for smaller customers increase from
£220,825 to £397,850 (the increase is £177,025), and the sales-force costs increase from
£143,000 to £245,000 (the increase is £102,000).

PTS: 1 REF: 10.11

5. Johnson Company produces office equipment for 16 major buyers. Of the 16 customers, one accounts
for 50 per cent of the sales, with the remaining 15 accounting for the rest of the sales. The 15 smaller
customers purchase equipment in roughly equal quantities. Orders placed by the smaller customers are
about the same size. Data concerning Johnson's customer activity follow:

Large Customer 15 Smaller Customers

Units purchased 50,000 50,000
Orders placed 6 294
Number of sales calls 26 224
Manufacturing cost £750,000 £750,000

Order-filling costs for Johnson Company total £270,000, and sales-force costs are £300,000.

Required:

a. Determine the amount of selling costs (order-filling and sales-force costs) allocated to (1)
the large customer and (2) the 15 smaller customers if these costs are allocated based on
sales volume.
b. Determine the amount of selling costs (order-filling and sales-force costs) allocated to (1)
the large customer and (2) the 15 smaller customers if these costs are assigned using
activity-based costing.
c. Comment on the differences in amounts attributed to the smaller customers in
requirements a and b.

ANS:
a. Order-filling costs:
Large customer: £270,000 ?6? .50 = £135,000

Large Smaller customers: £270,000 ?6? .50 = £135,000

Sales-force costs:
Large customer: £300,000 ?6? .50 = £150,000

Large Smaller customers: £300,000 ?6? .50 = £150,000

b. Order-filling costs: £270,000/(6 + 294) = £900 per order

Large Large customer: £900 ?6? 6 = £5,400

Large Smaller customers: £900 ?6? 294 = £264,600

Sales-force costs: £300,000/(26 + 224) = £1,200 per sales call

Large Large customer: £1,200 ?6? 26 = £31,200

Large Smaller customers: £1,200 ?6? 224 = £268,800

c. The smaller customers are shown to be more expensive when activity-based costing is used.
The smaller customers cost more due to smaller, more frequent orders and the need for more
contact with the sales force. The order-filling costs for smaller customers increase from
£135,000 to £264,600 (the increase is £129,600), and the sales-force costs increase from
£150,000 to £268,800 (the increase is £118,800).

PTS: 1 REF: 10.11

6. Etro Company sells a product used in many manufacturing processes. The sales activity involves three
activity areas:

Activity Area Cost Driver and Rate

Order taking £100 per purchase order
Sales visits £50 per visit
Delivery vehicles £1 per delivery mile
Product handling £0.05 a unit
Special runs £300 per run

The following customer information is given:

A B D
Units sold 100,000 80,000 60,000
List price £50 £50 £50
Actual sales price £45 £48 £50
Number of purchase orders 30 20 10
Number of sales visits 6 5 3
Number of deliveries 10 8 6
Miles traveled per delivery 40 5 20
Number of special runs 1 0 2

Required:

What is the profitability of customer B?

ANS:
B = (80,000 ?6? £48) - (20 ?6? £100) - (5 ?6? £50) - (8 ?6? 5 ?6? £1) - 0 = £3,837,710

PTS: 1 REF: 10.11

7. Todd Ltd. sells a product for £400 per unit. Its market share is 22 per cent of the units sold. The
marketing manager feels that the market share can be increased to 28 per cent of the units sold with a
reduction in price to £340. The product is currently earning a profit of £64 per unit. The president of
Todd Ltd. feels that his company needs to maintain the same profit level per unit. The market share
consists of £4,000,000 (10,000 units).

Required:

a. How many units does Todd Ltd. currently sell of the product?
b. What is the target price per unit?
c. What is the original cost per unit?
d. What is the target cost per unit?

ANS:
a. 10,000 ?6? 0.22 = 2,200
b. £340
c. £400 - £64 = £336
d. £340 - £64 = £276

PTS: 1 REF: 10.3

8. Spencer Manufacturing Company sells a product for £200 per unit. Its market share is 18 per cent of
the units sold. The marketing manager feels that the market share can be increased to 25 per cent of the
units sold with a reduction in price to £170. The product is currently earning a profit of £32 per unit.
The president of Spencer Manufacturing Company feels that his company needs to maintain the same
profit level per unit. The market share consists of £2,000,000 (10,000 units).

Required:

a. How many pounds does Spencer Manufacturing Company currently sell of the product?
b. What is the target price per unit?
c. What is the original cost per unit?
d. What is the target cost per unit?

ANS:
a. £2,000,000 ?6? 0.18 = £360,000
b. £170
c. £200 - £32 = £168
d. £170 - £32 = £138

PTS: 1 REF: 10.3

9. Foley Ltd. has predicted the following costs for this year for 100,000 units:

Selling and
Manufacturing Administrative
Variable £800,000 £200,000
Fixed 1,200,000 600,000
Total £2,000,000 £800,000

Required:

a. What is the mark up on variable costs needed to achieve a target profit of £200,000?
b. What is the initial unit selling price needed to obtain a target profit of £200,000 using the
variable cost mark up method?
c. What is the manufacturing cost mark up needed to obtain a target profit of £200,000?
d. What is the initial unit selling price needed to obtain a target profit of £200,000 using the
manufacturing cost mark up method?

ANS:
a. (£1,200,000 + £600,000 + £200,000)/(£800,000 + £200,000) = 200 per cent

b. (£800,000 + £200,000)/100,000 units = £10 per unit + (£1?8? ?6? 200 per cent) = £30

c. (£800,000 + £200,000)/£2,000,000 = 50 per cent

d. £2,000,000/100,000 units = £20 per unit + (£20 ?6? 50 per cent) = £30

PTS: 1 REF: 10.3

10. Wurster Company sells a product for £400 per unit. Its market share is 20 percent of the units sold.
The marketing manager believes that the market share can be increased to 28 percent of the units sold
with a reduction in price to £360. The product is currently earning a profit of £62 per unit. The
president of Wurster Company believes that his company needs to maintain the same profit level per
unit. The total market for the product has annual sales of 5,000 units.

Required:

a. How many units does Wurster Company currently sell of the product?
b. What is the target price per unit?
c. What is the target cost per unit?

ANS:
a. 5,000 ?6? .20 = 1,000 units

b. £360

c. £360 - £62 = £298

PTS: 1 REF: 10.3

Another random document with
no related content on Scribd:
anything, green apples, sloes, bilberries, or even bad cherries, and
never feel a bit the worse.

"I don't think your mamma would mind," said she; "but I'll tell you
what we'll do. We'll just put them into Miss Lina's little basket, and lay
it here on the table till the mistress comes home."

"Take me in your arms, Hetty, and carry me up and down, just for a
minute."

Hetty did so, and then the child consented to be read to. Generally,
she was very particular about Hetty's pronunciation, and corrected
her frequently, like the old-fashioned scrap she was. This evening,
however, she listened in silence; she was looking hard at the
cherries.

"There's the clock, Miss Flo. I must run and see after the cooking;
but I shall not be long."

She ran downstairs, and made what haste she could to return. But
while she was absent poor little Flo had contrived to reach the little
basket, and had eaten up every one of the cherries. She had been
gazing at them, and longing for them, and telling herself that mamma
would not let her have them, and that Hetty would give them to
Edgar and Lina; and I think it was the vision of the delicious cherries
disappearing down their throats, that finally conquered the poor
child. She meant to tell Hetty, but when she heard her coming, she
was ashamed; and putting the stalks and stones into the basket, she
dropped it between the back of her sofa and the wall. And poor
"Heedless Hetty," coming in just then, never missed the basket, nor
thought about the cherries again, until, when going to bed that night,
she took from her pocket four big brown pennies, and remembered
why she had "broken into her sixpence," as she said to herself.

But if Flo had been fretful before, it was nothing to her crossness
now. Nothing pleased her; the book was stupid, the room was too
hot, Hetty was unkind; she cried every minute, and finally burst into a
howl, declaring that "she was too miserable to be good." Her cries
awoke the baby, who promptly added his voice to the uproar, and
Hetty was fairly at her wits' end, when a knock at the door
announced the return of the expedition to B— and silenced Flo.

"Oh, ma'am, I am glad you are come, for I'm half afraid that Miss Flo
is ill. I never saw her like this before."

"Does she complain of any pain?"

"No, ma'am; but she's very restless. She was crying out loud just
now, but when you knocked she stopped."

"I heard crying, but I thought it was the baby."

"'Twas both, ma'am; but when she left off, so did he."

"I'm afraid you've been frightened, Hetty. I hope there's nothing much
the matter. Flo has been rather cross all day. Run up, children, and
Hetty will take your things off."

She herself walked into the parlour, to see after Flo. The child was
very white, wearied out with crying. As soon as she saw her mother,
she said, "Don't kiss me, mamma, I've been bad."

"But, my wee woman, I kiss you because I love you."

"You would not kiss me if you knew how bad I've been."

"We will not talk of that yet. See, I have brought you something that
you like;" and she opened a paper bag and displayed half a dozen
Naples biscuits.

Flo turned her face to the wall and wept.

Mrs. Eyre was puzzled, but the child seemed so ill and feverish that
she judged it better to ask no questions. She began getting the room
ready for tea, and then took baby out of his cradle, wide awake now,
and as jolly as usual. Mr. Eyre came home, the other children came
downstairs, and they all sat down to tea. Hetty had set the tray on
the table, and was leaving the room, when Flo called to her.

"Hetty! Take me to bed. I want nothing to eat. I'm tired; please, may I
go to bed?"

"Oh, my child, just eat a little bit. Hetty, has she eaten anything since
we went out?"

"No, ma'am."

"Take me to bed!" cried Flo desperately. "I will go to bed. Mamma,

give Lina and Edgar the biscuits; do, mamma, please."

Hetty put her to bed; she was very silent, until she was tucked snugly
into her little white nest, when she said, "Good-night, Hetty. I am a
very unhappy person. After what has happened, no one will love
me."

Hetty laughed, and kissed her. "That's a funny notion, Miss Flo. Why,
here's Zelica. After being asleep the whole evening, she is wide
awake now; I had better take her back to the parlour."

"No, no; give her to me. Oh, Zelica, I'm so glad that you won't
understand. Go away, now, Hetty, I want to think, and see if I can do
it."

"Do what, dear?—go to sleep, I hope. I will run up presently and see
how you get on."

Lina and little Edgar slept in the nursery, Flo in her mother's room.
When the children were in bed, Hetty stole in softly to look at Flo.
The child had fallen asleep, with tears on her cheeks and her pretty
eyelashes all wet. She moved restlessly, and made a little moan
occasionally. Hetty ran down to tell her mistress.

"Miss Flo is not sleeping easily at all, ma'am."

"I'll go up to her. Oh, John, what am I to do if Flo is ill, and Mrs.
Goodenough will not do a thing for me?"

"Did she tell you she would not, ma'am?" said Hetty quickly.

"I told her to-day that we could not manage to keep you, and that we
must manage as we did before you came; and she said it was only
fair to tell me that she could not help about the children; that she
would do her own work, and no more."

"I declare," said Mr. Eyre indignantly, "I should have given her
warning on the spot."

"She said much the same to me this morning, ma'am. And then I
thought—maybe if you let her go, and kept me. I went and asked
mother, and she's coming to-morrow to find out if Mrs. Goodenough
is in earnest. I know I'm not as good a servant, but I would do my
best—I would do anything, ma'am, to be with you and Miss Flo. I
know what has to be done, too—a stranger would give you more
trouble, and I should be here to carry Miss Flo, and all. Mother was
quite satisfied. Oh, do let me stay, ma'am!"

"It would be too much work for you, Hetty."

"Not it, ma'am. Not half as tiring as a day over mother's tubs! I'm
very strong—if you can overlook my heedless ways; and, oh! but I
would do my best."

"But, Mrs. Goodenough," began Mrs. Eyre, "she is old, and would
not easily get a place to suit her, and she has been with me a long
time, and—"

"Look here, Celia. I'll settle this in two sentences. Whether

Goodenough meant what she said or not, it is all the same. She has
never been an obliging servant; and it is for you, and not for her, that
I am going to care. Would you not rather have Hetty?"
"Oh, dear, yes, I should. I think Hetty and I could get on very well,
just for a time. It is only that Hetty will easily get a place, and—"

"Well, that's her own look-out. I'll see Mrs. Goodenough to-morrow
morning and tell her that she may go. In my opinion you'll be twice
as well off with Hetty. And I trust that this pinch is only for a time;
we'll get another Goodenough by-and-by."

"Well, Hetty, your master, you see, has made up his mind; and if I
find that your mother is content, you do not know how glad I shall be.
I really think it was making my poor little Flo ill, she was so sorry."

Hetty coloured and smiled, and looked so happy that one might have
thought she had just got great promotion.

Mr. Eyre said when she was gone, "That's a good girl, Celia. I never
liked Goodenough, selfish old cat! I hope she may end in the
poorhouse!"

"Now you don't, John. Poor old woman!"

Down came Hetty again, full speed. "Oh, ma'am, Miss Flo does look
so bad!"

They all ran upstairs. Flo was twisting and moaning as if in pain, her
cheeks flushed and her lips white. She woke up in a moment and
looked frightened.

"Flo, dear, are you feeling ill? You were crying out in your sleep."

Flo turned her face away. "I don't want anything," she said.

They thought she was asleep again; and as it was now late, Mrs.
Eyre sent Hetty to bed, and said that she would sit up for a little
while, just to see how the child slept.

Hetty went to the nursery and began to undress. Then came the
discovery about the sixpence—a sixpence no longer.
"The cherries!" said she to herself, "what has become of them? Sure,
they couldn't make the child ill, even if she ate them—and we put
them in the basket. But I'll just run down and look. I never thought a
few cherries could make a child ill; but if they have, the mistress
ought to know."

She went down to the parlour. But she could not find the basket—
that she did not find the cherries need scarcely be said.

While she was searching about, Mrs. Eyre came down. "I thought I
heard you moving about—what made you come down again?"

"Well, ma'am, I'm looking for some cherries that I bought for Miss
Flo, and she would not eat them until you were here to give her
leave. I put them into Miss Lina's basket, but I can't find them."

"Cherries! why, Hetty, you know I refused to get any for her, just as
you were going out! They always make her ill, and those the woman
had were neither ripe nor freshly gathered."

"I did not know they made her ill, ma'am."

"I think you were in the room when I said so."

"Oh no, ma'am. You only said you could not give her any. I meant no
harm, but she told me she did not think she ought to eat them, so we
put them in the basket, but I do wonder where they are."

As she spoke, she stooped to look on the floor for the missing
treasure, and at once cried out, "There they are!" Pushing the sofa
out from the wall, she seized the basket. Alas! it was empty. Hetty
grew quite red.

"They may have fallen out," said Mrs. Eyre. "Look on the carpet."

Hetty went down on her knees, and searched about; but she was so
long, that at last Mrs. Eyre said, "What are you about, Hetty? Are the
cherries there, or not?"
Hetty got up. She held out on the palm of her hand thirteen cherry
stones and a little heap of stalks.

"Hetty, oh, Hetty, perhaps you ate them! When she would not, you
know. You do forget things, you see."

"What is keeping you, Celia?" said Mr. Eyre, walking in.

"Did you, Hetty?" repeated Mrs. Eyre.

"No, ma'am."

"Oh, John, that is what ails poor little Flo. Hetty went and gave her a
lot of cherries, though she heard me refuse to buy them for her. And
now she tells me she put them in this basket, because Flo refused to
eat them—but the cherries are gone."

"Ma'am, it was wrong of me to buy them for her, I suppose; but

indeed I did not hear you say that they'd make her ill, nor did I ever
think it possible. I did not know she took them, but now I'm sure it
was while I was in the kitchen, for the poor little dear, she wasn't like
herself all the rest of the time. But to think of me never missing
them!"

"Well, Hetty, you have always told me the truth—I am sure you are
right. Oh, my poor little Flo! John, what had I better do?"

"Come up to her; we'll just wake her up for a moment, and give her
some of the medicine Dr. Haddon left for her. Say nothing, for she
will tell you in the morning, and that will be much better. As to you,
Hetty, mind this—you are never to give the child anything to eat,
except what your mistress provides. It was a very wrong and very
careless thing to do, and if the poor child is ill for a week, it is your
doing. Go off now to bed. Come, Celia."

Poor Hetty! That was a very miserable night.

 CHAPTER VIII.
AT THE SEA-SIDE.

THE next morning Flo seemed poorly, but not really ill. Mrs. Eyre
kept her in bed, and the child lay there quietly, and looked very sad.

"Mamma," she said, "when you're not busy, come to me."

"I can stay with you now if you like."

Flo looked up at her piteously.

"I've done a very wrong thing," said she.

"Yes, dear. Tell me all about it."

"Hetty brought me a present of two bunches of cherries. She did not

know that I ought not to eat them; she put them away in Lina's
basket. While she was reading I kept wishing for them, and when
she went to the kitchen I took the basket off the table. They looked
so nice I ate them. They were not very nice; they were sour, and not
cool—but I ate them. They gave me a very bad pain; and I was glad
of that. Oh, I've been just like Eve. Poor Eve, I am more sorry for her
now! But Hetty did not do wrong, mamma; it was all me."

"I did think my little girl could be trusted," said Mrs. Eyre.

"So did I, mamma," was the unexpected reply, which very nearly
surprised Mrs. Eyre into a laugh. "But I did it. Will you never trust me
again, mamma?"
"Soon, I hope; but you will have to earn it, Flo. Do not cry, my dear, I
know you are sorry, and I am glad you told me yourself. You are not
strong, like Lina, so I shall not punish you, and I hope you will try to
be sorry quietly, for if you cry and fret you will make yourself ill. And
try, dear, to see where you began to do wrong. Eating the cherries
was not the beginning, was it now?"

"No; I was cross all day, and I murmured, mamma, nearly all day,
and never tried to stop; and then I kept wishing, wishing for the
cherries."

"And if you had tried to leave off being cross and fretful it would not
have been so hard, because, you know, you often have done that.
God would have helped you."

"Will He forgive me, mamma?"

"Yes, love; shall we ask Him to do so now?"

"Oh yes! please do."

Mrs. Eyre knelt by the little crib, and prayed in simple, reverent
words, Flo listening with tears in her eyes.

"Amen, and won't you give me a kiss, mamma?"

I need hardly say that the kiss was given. Happy little Flo! To be so
taught, and so forgiven.

Mrs. Eyre then went down to the kitchen, and being rather a
cowardly little woman, I must confess that she dreaded the
impending interview with Mrs. Goodenough, who had been informed
by Mr. Eyre that after this week her services would be no longer
required, as he would not allow a servant to be kept who refused to
give Mrs. Eyre such help as she needed with the children.

Mrs. Goodenough's feelings had been so much hurt that she had
then and there demanded her week's wages, and another week,
instead of a week's warning, and Mr. Eyre, knowing how his wife
would rejoice to find her gone, paid her, and let her depart.

"I suppose," said she, standing in the hall, "the mistress means to
keep Hetty Hardy, which I wish her joy of it. But as to slaving on to
the end of the week, when you've dismissed me as if I hadn't been a
month in the house, that I will not do; my things are all in their
places, and the mistress knows that I'm honest—no need for
counting the half-dozen pots and pans, I suppose, so I'll just go at
once."

"You certainly shall," replied Mr. Eyre, opening the hall door, "and
without another word if you please."

So Mrs. Goodenough departed, and Hetty reigned in her stead. She

was busy in the kitchen, when her mother arrived.

"Oh, mother I'm sorry now that you had the trouble of coming, for
Mrs. Goodenough went away of herself. She told the mistress that
she would give no help with the children, and the master put her out;
and I think I'm to stay."

"You think! and what's wrong with you now, Hetty? I thought you'd be
delighted to have it settled—is it settled?"

"I hope so. Come down to the kitchen, mother, and I'll tell you all
about it."

"I declare!" said Mrs. Hardy, when she had heard the story, "I don't
know whether to laugh or cry. The notion! why, child, don't you see
that it was a very impertinent thing for you to do? To go buying a
penn'orth of cherries for the child because you fancied her mother
couldn't. I wonder when you're going to have a morsel of sense—I
do indeed! Well, I must find out if Mrs. Eyre is going to overlook it, for
I declare I don't expect it. Where is she?"

"She'll be here in a minute, mother."

Hetty went on with her work, dropping tears into the kitchen utensils,
and sighing in a heartbreaking manner; her mother watched her with
some amusement. At last Mrs. Eyre came down.

"Where is Mrs. Goodenough?" said she, looking round.

"The master bid me tell you, ma'am, she's gone. She wouldn't stay
even to wash up the things. He hadn't time to wait for you to come
down."

Mrs. Eyre's manner became very much more cheerful.

"Oh, Mrs. Hardy, I didn't see you. Good morning."

"The same to you, ma'am. I just waited to ask—because it's

pleasanter to have things settled—do you think you can put up any
longer with this oaf of a girl? Such a piece of impertinence I never
heard of. I'm downright ashamed of her, that's what I am."

"Hetty did not mean it for impertinence. She is very thoughtless, but
she is very truthful. I am sure she will never do such a thing again. I
will see how we get on, if you are quite satisfied to have it so."

"Quite pleased and satisfied, ma'am—and—There you go, Hetty!

Boo—hoo—like a baby! First, for fear you are to go, and now for joy
that you're to stay. I haven't a bit of patience with you, and that's the
solemn truth. Good morning, Mrs. Eyre—when she's done
blubbering, she'll put away the rest of those things, I hope."

Mrs. Eyre went upstairs with her.

"You are too hard upon Hetty," said she.

"Ma'am, that's just because you are too soft with her. If you gave her
a raking good scolding when she makes a fool of herself; she'd be all
the better of it."

Mrs. Hardy was so far right, that it was quite as well for Hetty that
she began her new undertaking in a slightly subdued spirit. Between
that, and the fact that she hardly ever had a spare minute, she got
on very well. Of course she made mistakes, and sometimes forgot to
do this or that; but on the whole she did well, and was a great
comfort to her busy little mistress. And Flo, who was taken out every
fine day, began to improve slowly, but perceptibly.

Mrs. Eyre, who did not expect too much from a girl of fifteen, was
satisfied with Hetty, and even Mrs. Hardy began to think that all her
"raking fine scoldings" were taking effect, and "making a woman of
the girl" at last.

The only person who felt disappointed was Mrs. Goodenough, who
had confidently expected to be recalled on account of Hetty's
blunders, and who had not found it easy to get a comfortable place.
However, no one can be very sorry for her, as she deserved to be
disappointed. Her mistress had always been most kind and
considerate, and I pronounce Mrs. Goodenough a selfish old
woman.

In about six months the Eyres had paid off the few debts incurred
during Mr. Eyre's illness, and, moreover, he got a very welcome and
unexpected rise in his salary. One of the partners in the great firm
died, and his son was a man of larger views and more generous
feelings than any of the other persons concerned. He was quite
shocked to find how hard and grasping the firm had always been to
their clerks and salesmen, and with much trouble he succeeded in
bringing about a better state of things.

The very first thing that Mr. Eyre insisted on was, that some one
should be hired in Mrs. Goodenough's place, for he thought that both
his wife and Hetty had rather too much to do. And who do you think
came begging to be engaged but the excellent Goodenough herself?
And in a very subdued and anxious state of mind, I assure you.

Mr. Eyre laughed when he heard that she was to come back, and
said that his wife was a silly little woman. Mrs. Goodenough was
very civil to Hetty, but she had by no means forgiven her for having
offered to remain in her place, and the girl had no friend in the old
woman from that time.

Another benefit conferred on those in the employment of Miller &

Cartwright by the new Mr. Miller, who had come home to take his
share in the management, was an annual holiday. Mr. Eyre was
informed that he might take a fortnight in July, and that Mr. Miller
would fill his place for the time. And judge of the delight of the
children when they were told that they were to spend most of the
time at R—, a small village on the coast of —shire, chosen because
it would be an easy journey for Flo. Hetty was to go with them, and
Mrs. Goodenough was to give the house a thorough cleaning during
their absence.

When the much-expected day arrived, Flo insisted on taking Zelica

with her, saying that Mrs. Goodenough did not love Zelica, and
would not make her happy. As no one could contradict this
statement, Zelica was shut into her basket, and became one of the
travellers.

Only a little while ago, to keep Zelica in the basket would have been
one person's work; but her kitten days were over, and though she
could enjoy a game of play still, she no longer wanted to be playing
all day long. She lay contentedly in her basket, peeping out through
the wickerwork with a supercilious air, as is the manner of cats. Flo
lay on the cushions with her head on Hetty's lap, and Zelica's basket
held in her arms. Lina and Edgar danced about in great glee—Flo
had to tell them more than once that they were "childish."

At last they reached R—, and Hetty carried Flo to the pleasant
lodgings that Mr. Eyre had engaged. The child was too tired to care
even to see the sea; as Lina was wild to do. But next day she was
rested, and her delight was very great. When the tide was low, there
was a beautiful beach, where she could lie on a soft shawl, and
actually pick up pebbles and shells for herself. Then, when the tide
was high, there was a zigzag path up the low cliff, and near the top
there was a hut, with a broad seat all made of sods, green and fresh;
and here Hetty and Flo spent many happy hours, while the others
rambled about. Zelica condescended to go with them to the hut;
down on the beach she would not go, as her delicate paws got wet
with salt water. Poor Hetty! That wooden hut haunted her dreams for
many a night, for it was here that she got a lesson which went far
towards curing her of her thoughtlessness.

The days passed very happily. Mrs. Eyre and the three children
bathed and rambled about. Even Baby Johnnie could walk now; they
got sunburned and freckled, and loaves of bread disappeared before
them as if by magic. Mr. Eyre, too, began to look brown and strong,
and even Flo's little cheeks got a pale pink touch. As to the other
members of the family, Hetty and Zelica, they could hardly look
better than they always did.

Their pleasant stay was drawing to an end, when one day Mr. Eyre
announced that he was off for a long solitary walk, as he wished to
go farther and by rougher paths than any one else was equal to.
Before he went, he carried Flo up to the hut on the cliff, Hetty
following, laden with her workbasket, Flo's pillow and shawls and a
second basket, which contained the cat. Also Hetty brought a
charming story, which Flo had heard many times, but now wished to
hear again.

"There you are, little woman," said Mr. Eyre, laying the child down on
the scat, where Hetty proceeded to make her comfortable. "I declare,
Hetty, I think she is a little bit heavier, and she surely looks better."

"That she does, sir. We'll have her dancing country dances before
long."

"That's what you always say, Hetty. But I'm not sure that I want to
dance country dances. I would rather go out walking on the common
with the rest."

"That will be a pleasant day, little Flo. Now, good-bye. I shall be back
in time to help you down the path, Hetty, so you may wait for me if
the day does not change; and I don't think it will do that."
"I wonder is it always fine here?" said Flo, as she watched her father
going up the steep path.

"Oh, no, Miss Flo! They have their share of rain and storm, no doubt.
Don't you remember the old fisherman, who told you how his boat
was lost, and his grandson was—"

"Don't, Hetty! Oh, I dreamed of it! Do let me forget it. I hope it will be
fine all the time we're here. The sea is so nice. Does not that long
bright streak look as if we could walk on it? I want to think of it like
this always."

"So we will, Miss Flo. I don't suppose there are any storms in the
summer."

With such conversation, Hetty working all the time, they passed the
morning. Then Flo had some biscuits and milk, and Zelica, having
had her share of milk, got back into her snug basket, and went fast
asleep. Hetty began to read "Whiter than Snow," which I think she
must have known of by heart. And Flo listened until the murmur of
the sea mingled with the well-known words, and Hetty's voice
sounded far-off and indistinct. After that, Flo was asleep.

Hetty covered her more completely, and then stitched away at the
brown holland pinafore she was making. Presently a shrimp-girl,
whose acquaintance she had made on the beach, came up the path
with a sackful of these little creatures on her back. Hetty threw down
her work and went out to talk to her. The girl was glad to rest, and to
have a chat, and Flo slept peacefully, so that it did not matter.

"Well, I must be going," said the girl at last. "I have eight miles to
walk to sell my shrimps to-day. Such a take as we had! And Joe
Mallard gave up fishing early, and went and sold all his in the village;
so no one would look at mine. Here, miss, I'll give you some if you
have anything to put them in."

Hetty produced the paper bag in which Flo's biscuits had been
packed, and the shrimp-girl filled it generously.
"That's for yourself, mind. You must boil them till they're red. Good-
bye now; I must lose no more time."

"Good-bye, and thank you kindly," said Hetty, going back to her work.

But she did not work long. The pleasant shade of the hut—the wide
outlook over the deep blue sea, dotted all over with fishing boats,
tempted her to gaze. Laying down her work on her knees, she
gazed, and dreamed, and idled. How much time she passed in this
occupation she had no idea—if one can call it an occupation.

At last Flo stirred in her sleep, and Hetty roused herself. She
changed the position of the pillow a little, and the child was soon in a
deep sleep again.

But now Hetty perceived that Zelica was gone. The basket was
open, and empty. Hetty tried to remember when she saw her last.
She had been there when the shrimp-girl came—and Hetty thought
she had seen her when she returned to the hut.

"She'll have gone back to the lodgings—but I will take a look round;
the child won't wake this hour."

She went out and looked up and down the path. Coming back, she
perceived that Zelica, who was not a perfectly honest cat,—poor Flo
always thought it was because she had seen her mistress take the
cherries!—had been at the bag of shrimps. She had poked a hole in
the thin, wet paper, and Hetty concluded that she had stolen a
shrimp, and run off to try if she liked it.

"She can't be far-off," muttered Hetty, taking a look at Flo, who was
lying quite quiet. "I'll just run up the path a bit. She'll have gone that
way, the little thief! She won't go home with her stolen shrimp."
 CHAPTER IX.
THE BIG BLACK DOG.

IT was about two o'clock when Hetty left the hut on the slope of the
cliff path, and it was a little past three when Mr. Eyre reached it on
his way home. He had had a most delightful walk, and his pockets
were full of spoils, brought home for little Flo: flowers, sea-weeds, a
deserted nest, feathers—every pretty thing that he had seen that
was likely to please his little sick girl. There was no sound of talking
as he drew near, so he entered quietly, thinking that the child was
asleep.

But Flo was not there. The hut was deserted. The shawls used for
covering her when she slept were on the ground—and there too was
Zelica's basket, all bent and frayed. Also a wet paper and a lot of
half-dead shrimps, some of them mashed up in a very unsightly
manner, and Hetty's work; all these things lay here and there, but
Flo, Hetty, and Zelica had vanished.

"The child must have been ill. Stay! there's the mark of a big dog's
paw on the shawl! They have been frightened, and Hetty has taken
her home to her mother."

Hastily gathering up the scattered articles, all save the shrimps, he

began to descend the zigzag path rapidly. He turned the first corner,
and—what was that at the bottom of the next descent? He flung
away everything that he was carrying, and flew down the path. Yes—
his fears were only too well justified! it was Flo lying on her face, and
between her and the edge of the cliff sat a large black retriever, who
looked up in the newcomer's face and whined. Then he put his nose
to the child's head, and cried again.
John Eyre lifted his little one; her face was cut and scratched, and so
were her poor little hands. But, oh! that was nothing to what he
feared for her! How had she come there? She was quite insensible,
and looking back he saw a scrap of her frock and one little soft shoe
on the rough track; she had fallen and rolled down the steep incline
—something had stopped her, perilously near the edge, over which
she would otherwise have fallen eight or nine feet, coming down on
the rocky surface of another division of the zigzag. It seemed as if
the dog had stopped her; at all events, he was sitting between her
and the edge.

But you may be sure that Mr. Eyre did not delay to decide the
question. Carrying the child steadily, he hurried on, the dog running
by his side, looking up with almost human anxiety in his face. He
followed to the door of the lodgings, saw Flo carried in, and then ran
off.

"Celia! Celia! come here. Oh, my dear, I can't take time to warn you
—something has happened to Flo—she has fallen."

Mrs. Eyre was by his side. "John, is she dead?"

"No, no,—not dead. Let me lay her on her bed. See! She is only
scratched—she moved then. Oh, Celia! The child is alive!"

Mrs. Eyre brought water, and opened the child's frock, which was all
twisted round and round her. Flo opened her eyes,—but, alas! she
did not seem to know them. She screamed, as if in terror, crying out,
—

"Oh, Hetty, Hetty! The dog—the big black dog! Oh, Hetty! Come
back, come back! Oh, Zelica, poor Zelica!"

"Where is Hetty, John?"

"I don't know. But, if this is her fault—!"

His voice was lost in Flo's terrified screams.

"John, dear, she is very ill. I must have help. Go to the Convalescent
Home over there, and ask the nurse to come to me—she was talking
to Flo the other day. And get a doctor: I think we must lose no time."

Mr. Eyre ran to the Home, and was very fortunate, for the nurse
could easily be spared, as there were not many patients, and they
were all nearly well. So she came at once, and so did the doctor.

It seemed a long time before the doctor came downstairs to the room
where poor John Eyre waited for him, and where the three children
sat cowering in a corner, terrified by Flo's shrieks, and their father's
face of misery.

"Your wife, sir (I don't know your name yet), tells me that the doctor
who knows the child's case could be here in a few hours if you went
for him. There are no bones broken; but she is in a fearful state of
terror and excitement, and I should be very glad to have this Dr.
Haddon's help. You see, I don't know anything about the previous
injury. Mrs. Dooner, the nurse, can stay here, and I should advise
your taking these poor little things home, if possible. There will be
plenty to do, without having them here."

"I will take them home, and bring Haddon back. When is the next
train?"

"There is one in half an hour. If no one else sends for me, I will stay
here until you return. You may be able to get back by one which
stops here at nine, but to do that you must not lose a moment."

"You're very kind," John Eyre said, and began putting on the
children's hats, which lay on the window seat.

Just as they were ready, a flying step passed the window, and in
rushed Hetty, looking like a mad girl.

"Miss Flo," she gasped. "Oh, sir, Miss Flo!"

"Where have you been?" said John Eyre sternly.

"Miss Flo! Miss Flo!" cried Hetty.

"You may hear her screams. She is here. I found her half-way down
the path. Where were you? Speak, girl!"

"Zelica ran away; I went after her. She—I saw her on the green place
at the top of the cliff. She ran off, and I after her. She got into a lane
that goes away from the sea, and when I saw that I couldn't catch
her, I turned back; but I had lost my way. Oh, I have run till I'm nearly
dead, and when I got to the hut—oh, sir!—"

"You left the child, and went away, far enough to lose yourself. I don't
know what happened to her, but I think she is dying. Go—go home!
Let me never see your face again."

"Oh, Mr. Eyre! I deserve it; but the mistress will have no one to help
her."

"I will see to that. Here is your money. Go at once! I cannot bear the
sight of you."

He took the three children, and left the house. He was but just in
time to catch the train.

Hetty sank upon the window seat and listened, her heart wrung
almost past endurance, to the sounds upstairs. Poor Flo! Had any
one thought of it, the sight of Hetty, for whom she called so pitifully,
would have quieted her better than anything. But Mrs. Eyre did not
know that Hetty was in the house, and no one else attended to the
meaning of the child's cry.

"Zelica! oh, Zelica! The big black dog has eaten Zelica! He'll kill me
too! Hetty! Hetty! come back!"

"If this can't be stopped, the child will be in convulsions," said the
nurse.